Covid-19: tailored support for mortgage difficulties
27 Aug 2020
The Financial Conduct Authority (FCA) is consulting on proposals to ensure that firms provide tailored support to mortgage borrowers who continue to face payment difficulties due to coronavirus
27 Aug 2020
During the initial phase of the pandemic, lenders were required to offer payment holidays providing mortgage borrowers with immediate and temporary support.
The FCA said the majority of those who have had a payment holiday are expected to resume full repayment, but that many will remain in financial difficulty.
It is publishing additional draft guidance for firms, to ensure further support, both for those who have benefitted from payment deferrals under the current guidance who continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current guidance ends.
The current guidance will continue to provide support for those impacted by coronavirus until 31 October, with consumers able to take a first or second three-month payment deferral. The FCA expects the current guidance to expire on 31 October, but will keep this under review depending on how the wider situation develops.
The newly published draft guidance proposes that firms should consider the appropriateness, and use, of a range of different short and long-term support options to reflect the specific circumstances of their customers.
This could include extending the repayment term or restructuring of the mortgage.
Where consumers need further short-term support, firms should offer arrangements for no or reduced payments for a specified period to give customers time to get back on track.
Christopher Woolard, FCA interim chief executive, said: ‘It is important that consumers who can afford to resume mortgage payments should do so. However, we understand that borrowers facing payment difficulties because of the pandemic will continue to face uncertainty and may also experience temporary interruptions in income.
‘We are proposing that firms contact their borrowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track.
‘Firms should not take a “one size fits all” approach.’
Under the proposed guidance, firms should prioritise giving tailored support to borrowers who are at most risk of harm, or who face the greatest financial difficulties.
Firms should also provide borrowers with the support they need in managing their finances, including through self-help and money guidance, and refer borrowers to debt advice if this meets their needs and circumstances. They should also be clear about the credit file implications of any forms of support offered.
The draft guidance is open for comment until 1 September.